response, State ex rel. State Auto Property Ins. Co. v ...Docket No. 15-1178 THE HONORABLE JAMES C. STUCKY, Judge of the Circuit Court of Kanawha County, West Virginia and CMD PLUS,

-

il~-~ 0 [~ ~ VII I i

rk~ 29 2015 i~ IN THE SUPREME COURT OF APPEALS OF WEST VIRG NVt-_------J

- RORY L PlY n CLErK SUPREME COLIRT OF APPEALSDOCKET NO 13-0931 OF WEST VIRGINIA

(Lower Tribunal Circuit Court of Kanawha County West Virginia)

(Civil Action No ll-C-606)

STATE OF WEST VIRGINIA ex reI STATE AUTO PROPERTY INSURANCE COMPANIES dba STATE AUTO PROPERTY AND CASUALTY INSURANCE COMPANY an Ohio Company

Petitioner

v Docket No 15-1178

THE HONORABLE JAMES C STUCKY Judge of the Circuit Court of Kanawha County West Virginia and CMD PLUS INC a West Virginia Corporation

Respondents

Response in Op~osition to Petition for Writ of Prohibition

Counsel for Respondent CMD Plus Inc Charles M Johnstone II (WV Bar 5082) David A Dobson (WV Bar 12092) JOHNSTONE amp GABHART LLP Post Office Box 313 Charleston WV 25321 (304) 343-7100 sjohnstonewvlawnet ddobsonwvlawnet

TABLE OF CONTENTS

RESPONSE TO THE QUESTION PRESENTED 1

STATEMENT OF CASE 1

SUMMARY OF THE ARGUMENT 2

STATEMENT REGARDING ORAL ARGUMENT AND DECISION 3

ARGUMENT 3

A Petitioner has not met its burden for issuance of a Writ of Prohibition 3

B The Renewed Motion to Dismiss was appropriately denied by the lower court 5

1 CMD has properly pled a claim for common law bad faith 6

11 CMD has properly pled a claim for violations of the WV Unfair Trade Practices Act 7

111 CMD has properly pled a claim for breach of contract 8

C CMD has properly asserted and is able prove its claims for first-party bad faith violations of the WV Unfair Trade Practices Act and breach of contract 9

1 CMD has properly asserted and can prevail on its claim of Breach of the Duty of Good Faith and Fair Dealing 9

11 CMD is not a Third-Party Claimant in regards to its bad faith claim 11

iii CMDs claims are not barred by the Statute of Limitations 12

IV CMD properly asserted and can prove its breach of contract claim against State Auto 13

CONCLUSION 14

TABLE OF AUTHORITIES

Cases

Akerson v City ofBridgeport 36 ConnApp 158649 A2d 796 (Ctl994) 5

Cantley v Lincoln County Commn 221 WVa 468 655 SE2d 490 (2007) 6

Chapman v Kane Transfer Co Inc 160 WVa 530236 SE2d 207 (1977) 6

Daugherty v Allstate Ins Co 55 P3d 224 (ColoApp2002) 10

Findley v State Farm Mut Auto Insu Co 576 SE2d 807 (WVa 2002) 12

Forshey v Jackson 222 WVa 743671 SE2d 748 (2008) 6

Graham v Beverage 211 WVa 466 566 SE2d 603 (2002) 13

Gutierrez v Gutierrez 116 NM 86 860 P2d 216 (CtApp1993) 5

Hayseeds v State Farm Fire and Cas Co 177 WVa 323352 SE2d 73 (1986) 7 11

John W Lodge Dist Co Inc v Texaco Inc 161 WVa 603245 SE2d 157(1978) 6

Loudin v National Liability amp Fire Ins Co 228 WVa 34 716 SE2d 696 (2011) 11

Miller v Fluharty 201 WVa 685 500 SE2d 310 (1997) 12

A1orton v Amos-Lee Sees Inc 195 WVa 691466 SE2d 542 (1995) 11

Noland v Virginia Ins Reciprocal 224 WVa 372686 SE2d 23 (2009) 10 13

School Bd ofMarion Co v Angel 404 So2d 359 (FlaDistCtApp1981) 5

State ex Rei Allstate Ins v Gaughan 203 WVa 358 508 SE2d 76 (1998) 10

State ex rei Arrow Concrete Co v Hill 194 W Va 239 460 SE2d 53 (1995) 4

State ex reI Brison v Kaufman 213 WVa 624 584 SE2d 480 (2003) 10

State ex rei Hoover v Berger 199 WVa 12482 SE2d 12 (1996) 1

State ex rei North River Ins Co Chafin 233 WVa 289 758 SE2d 109 (2014) 4

State ex reI Piper v Sanders 228 WVa 792 724 SE 2d 763 (2012) 3

State ex rei Williams v Narick 164 W Va 632 264 SE2d 851 (1980) 3

Texaco Inc v Cottage Hill Operating Co 709 F2d 452 (7th Cir1983) 4

Thornton v Hickox 886 P2d 779 (Idaho 1994) 5

11

Wenzel v Enright 68 Ohio St3d 63 623 NE2d 69 (1993) 5

Wilfongv Wilfong 156 WVa 754197 SE2d 96 (1973) 4

Rules

West Virginia Rules of Civil Procedure 12 3

Statutes

West Virginia Code sect33-11-1 et seq 7 8

West Virginia Code sect 53-1-1 3

Other Authorities

15A Charles Alan Wright et aI Federal Practice and Procedure sect 39141 (2d ed 1992) 4

17AAmJur2d Contracts sect 370 14

III

I RESPONSE TO THE QUESTION PRESENTED

Respondent CMD Plus Inc respectfully submits that the question presented by the

Petition is actually a prohibited substitute for an appeal of a lower court ruling by Judge James C

Stucky in denying the Petitioners Motion to Dismiss Respondent submits that Petitioner fails to

meet its burden of showing entitlement to the extraordinary relief for which it seeks and that Judge

Stuckys ruling was not clearly erroneous as a matter of law nor did Judge Stucky abuse his

discretion

II ST ATEMENT OF THE CASE

This case stems from an underlying lawsuit filed by Barry and Ann Evans (Plaintiffs)

against CMD Plus Inc (hereinafter referred to as CMD) in April 2011 App at 00009 The

Plaintiffs alleged nuisance trespass and negligence against CMD in regard to a hillside slip that

occurred as a result of construction activity performed by CMD on the adjacent property Id

Subsequently CMD sought leave and was granted authority to file a Third-party complaint against

State Auto related to the Plaintiffs claims In its Third-Party Complaint CMD alleged common

law bad faith violations of the West Virginia Unfair Trade Practices Act and breach of contract

against State Auto App at 00026-00035 In response to the Third-Party Complaint State Auto

filed a Motion to Dismiss in April 2012 App at 00036-00081 The Court rejected State Autos

arguments and the Motion was denied in September 2012 App at 00097-00098 Importantly

State Auto filed no Petition for Writ ofProhibition or for any other extraordinary relief at that time

The Circuit Court while allowing discovery stayed the Third-Party action pending resolution of

the Plaintiffs civil-action

After nearly four (4) years of litigation including a Declaratory Judgment action in which

State Auto unsuccessfully attempted to avoid insurance coverage State Auto finally resolved the

Plaintiffs claims against CMD App at 00119-00125 Subsequently the Court entered a new

Scheduling Order so that CMD could litigate its claims against State Auto App at 00188

However State Auto once again moved for a dismissal of the Third-Party Complaint and filed a

Renewed Motion to Dismiss in August 2014 App at 00124-00161 State Auto made virtually

the same arguments that had been the basis of its prior unsuccessful motion State Auto also

attempted to inject additional facts including its settlement of the Plaintiffs claims to support its

renewed motion Said renewed Motion was set for hearing in October 2015 and was again denied

by Order dated November 102015 App at 0001-0008

State Auto now has filed the instant extraordinary Writ of Prohibition seeking that this

Honorable Court issue a show cause why the Court should not grant the Petition for Writ of

Prohibition and reverse the Circuit Courts Order Denying State Autos Renewed Motion to

Dismiss CMD asserts that Petitioner fails to meet its burden of showing entitlement to the

extraordinary relief and the Writ of Prohibition should be denied

III SUMMARY OF THE ARGUMENT

Petitioner State Auto completely fails to meet its burden of showing entitlement to the

extraordinary relief of a Writ of Prohibition and the Court should refuse the Petition This Court

has frequently explained that it examines the following factors in a Writ of Prohibition

(1) whether the party seeking the writ has no other adequate means such as direct appeal to obtain the desired relief (2) whether the petitioner will be damaged or prejudiced in a way that is not correctable on appeal (3) whether the 10wer tribunals order is clearly erroneous as a matter 0 law (4) whether the lower tribunals order is an oft repeated error or manifests persistent disregardor either procedural or substantive law and whether the lower tribunals order raises new and important problems or issues olaw ofirst impression

(Quoting in part Syl Pt4 State ex rei Hoover v Berger 199 WVa 12482 SE2d 12 (1996)

The Court went on to state that [t]hese factors are general guidelines that serve as a useful starting

point for detemlining whether a discretionary writ of prohibition should issue Although all five

need not be satisfied it is clear that the third factor the existence of a clear error as a matter of

law should be given substantial weight Id

Examination of these factors clearly results in refusal of the Writ In fact Petitioner only

argues factor number three (3) in its Petition However despite the arguments by Petitioner Judge

Stuckys Order is not clearly erroneous as a matter oflaw As shown herein the Petition is nothing

2

more than an attempt to appeal a non-appealable Order and thus should be summarily refused As

for the arguments on the merits the lower Court properly mled pursuant to Rule 12(b)(6) ofthe

West Virginia Rules of Civil Procedure that CMD has sufficiently pled all of its claims in the

Third-Party Complaint to show it is entitled to relief

IV STATEMENT REGARDING ORAL ARGUMENT AND DECISION

Respondent submits that The Writ of Prohibition should be summarily refused and that

oral argument is unnecessary If the Court deems that oral argument is necessary this case is

appropriate for a West Virginia Rule of Appellate Procedure 19 argument and disposition by

memorandum decision

V ARGUMENT

A Petitioner has not met its burden for issuance of a Writ of Prohibition

A Writ of Prohibition is inapplicable to the case at bar Pursuant to West Virginia Code sect

53-1-1 prohibition is a form of extraordinary relief appropriate only where a lower court exceeds

its legitimate powers The writ ofprohibition shall lie as a matter of right in all cases of usurpation

and abuse ofpower when the inferior court has no jurisdiction of the subject matter in controversy

or having suchjurisdiction exceeds its legitimate powers Id This Court has been very clear that

Prohibition will not issue to prevent a simple abuse of discretion by the trial court State ex reI

Piper v Sanders 228 WVa 792 797 724 SE 2d 763 (2012)

This Court has further stated that [t]traditionally the writ of prohibition speaks purely to

jurisdictional matters It was not designed to correct errors which are correctable upon appeal

State ex reI Williams v Narick 164 WVa at 635 264 SE2d at 854 The Court further explained

that the writ does not lie to correct mere errors and that it cannot serve as a substitute for appeal

writ of error or certiorari Id (emphasis added) Because of the nature of the writ there has been

a general reluctance to allow its use in interlocutory matters unless there was exhibited some

obvious jurisdictional defect or purely legal error on the part of the trial court In the absence of

jurisdictional defect the administration ofjustice is not well served by challenges to discretionary

rulings of an interlocutory nature Id at 636

3

Factor number one (1) stated by the Berger Court is whether the party seeking the writ

has no other adequate means such as direct appeal to obtain the desired relief Petitioner is

attempting to appeal a denial of the Renewed Motion to Dismiss through a Writ of Prohibition

For obvious reasons Petitioner has resisted categorizing this prohibition as an appeal of the denial

of the Renewed Motion to Dismiss Essentially that is what State Auto is attempting to do and

it is improper The denial ofa motion for failure to state a claim upon which relief may be granted

made pursuant to West Virginia Rules ofCivil Procedure 12(b)(6) is interlocutory and is therefore

not immediately appealable Syl Pt 2 State ex rei Arrow Concrete Co v Hill 194 W Va 239

460 SE2d 53 (1995)

In Hill the Court refused to grant a Writ ofProhibition for a denial ofa Motion to Dismiss

The Court found that [i]indirectly the defendants are asking this Court to address the trial courts

denial of their motion to dismiss for failure to state a claim rd at 60 In denying the Writ the

Hill Court relied upon Wilfong v Wilfong 156 WVa 754 197 SE2d 96 (1973) which concluded

that [t]he entry of an order denying a motion for summary judgment made at the close of the

pleadings and before trial is merely interlocutory and not then appealable to this Court

The Hill Court reasoned that although Wilfong did not directly address the denial of a

motion for failure to state a claim upon which relief can be granted made pursuant to W Va R Civ P

12(b)(6) the above rationale in Wilfong is nevertheless applicable to a 12(b)(6) motion 460

SE2d 53 at 60 Since the Hill decision this Court has consistently refused to grant a Writ of

Prohibition based upon an Order denying a Motion to Dismiss (emphasis added)

In fact as recently as 2014 this Court again reiterated that a writ ofprohibition is not

available to correct discretionary rulings when it denied a Petition for Writ ofProhibition based

upon an Order denying a Motion to Dismiss State ex rei North River Ins Co Chafin 233 WVa

289294758 SE2d 109 114 (2014) (See also 15A Charles Alan Wright et al Federal Practice

and Procedure sect 39141 at 493 (2d ed 1992) (Ordinarily the denial [of a motion to dismiss for

failure to state a claim] is not appealable (footnote omitted)) Texaco Inc v Cottage Hill

Operating Co 709 F2d 452 453 (7th Cir1983) (As a general rule denials of motions to dismiss

4

are not appealable (citations omitted)) Akerson v City ofBridgeport 36 ConnApp 158 649

A2d 796 (Ct1994) School Bd ofMarion Co v Angel 404 So2d 359 (FlaDistCtApp1981)

(Prohibition is not available to review the correctness of a judges ruling on a motion to dismiss)

Thornton v Hickox 886 P2d 779 (Idaho 1994) Gutierrez v Gutierrez 116 NM 86 860 P2d

216 (CtApp1993) and Wenzel v Enright 68 Ohio St3d 63 623 NE2d 69 (1993) Thus it is

clear that Petitioner is wrongfully attempting to use a Writ of Prohibition to obtain this Courts

review of a non-appealable order

Factor number two (2) whether the petitioner will be damaged or prejudiced in a way that

is not correctable on appeal weighs heavily against Petitioner Judge Stuckys Order is not a

final order on the merits Said decision does not rule on the merits of CMDs claims or of

Petitioners defenses Petitioner is not prejudiced as it may renew its Motion as summary judgment

which if denied would be appealable It is actually CMD which is prejudiced by delay in

prosecution of its claims by this fruitless attempt at prohibition

Factor number three (3) whether the lower tribunals order is clearly erroneous as a matter

of law weighs heavily against the Petitioner As more fully explained below CMDs claims

against State Auto are all legitimate causes ofaction based upon West Virginia law Judge Stucky

viewed the Third-Party Complaint under the appropriate 12(b)(6) standard and found that CMD

had asserted claims upon which it can prevail

Factors four (4) and five (5) which were not even discussed by Petitioner in its Petition

also weigh against prohibition The lower Courts ruling is not an oft repeated elTor and does

not manifest persistent disregard for either procedural or substantive law Judge Stucky made a

discretionary ruling based upon the appropriate 12(b)( 6) standard The ruling also does not raise

any new and important problems or issues of law CMDs allegations against Petitioner are

well-established causes of action based upon West Virginia statutory and common law

B The Renewed Motion to Dismiss was appropriately denied by the lower court

The purpose ofa motion under Rule 12(b)(6) of the West Virginia Rules of Civil Procedure

is to test the sufficiency of the complaint A trial court considering a motion to dismiss under Rule

5

12(b)(6) must liberally construe the complaint so as to do substantial justice Cantley v Lincoln

County Commn 221 WVa 468 470 655 SE2d 490 492 (2007) In addition Motions to

Dismiss are viewed with disfavor and the Supreme Court of Appeals counsels lower Courts to

rarely grant such motions Forshey v Jackson 222 WVa 743 671 SE2d 748 (2008)

The trial court in appraising the sufficiency of a complaint on a Rule 12(b)(6) motion

should not dismiss the complaint unless it appears beyond doubt that the plaintiff can prove no set

of facts in support of his claim which would entitle him to relief Syl Pt 3 Chapman v Kane

Transfer Co Inc 160 WVa 530236 SE2d 207 (1977)

In discussing the above syllabus point this Court has further explained that

[all that the pleader is required to do is to set forth sufficient information to outline the elements of his claim or to permit inferences to be drawn that these elements exist The trial court should not dismiss a complaint merely because it doubts that the plaintiff will prevail in the action and whether the plaintiff can prevail is a matter properly determined on the basis ofproof and not merely on the pleadings

John W Lodge Dist Co Inc v Texaco Inc 161 WVa 603 605-6 245 SE2d 157 159

(1978) (citation omitted)

With that being said the lower court in viewing the four comers of the Third-Party

Complaint and viewing all the facts in the light most favorable to CMD found that CMD has

asserted claims upon which it can prevail Nevertheless State Auto in its Renewed Motion to

Dismiss and in the instant Petition continuously alleges and argues specific facts and evidence

which are not included in the four-comers of the Complaint and not to be considered under the

12(b)(6) standard of review As shown herein and already established by the lower court CMDs

claims for common law bad faith violations of the WV Unfair Trade Practices Act and breach of

contract were properly pled based upon West Virginia law

1 CMD has properly pled a claim for common law bad faith

In the Third-Party Complaint CMD alleges State Auto had a duty and legal obligation to

CMD to make a full investigation of CMDs claims and to effectuate a prompt fair and equitable

6

settlement of those claims App at 00017-00018 Specifically CMD alleged that State Auto

committed bad faith through

a its delay in investigating and taking action on claims made by and on behalf of

CMD and the Plaintiffs

b by its refusal to effectuate the necessary repairs to the Shah Property and the Evans

Property and

c by its delay in handling facilitating and approving repair andor relocation of the

sanitary sewer line

Id

The allegations in the Third-Party Complaint were also cited verbatim in Judge Stuckys

Order denying Petitioners Renewed Motion to Dismiss App at 0003 As further alleged in

the Third-Party Complaint and cited in the Order CMD alleges that State Auto breached its

common law duty of good faith and fair dealing to CMD such to its conduct amounts to bad faith

as recognized in the seminal case of Hayseeds v State Farm Fire and Cas Co 177 WVa 323

352 SE2d 73 (1986) Id CMD has also clearly alleged that the delays and inaction by State Auto

caused it to suffer damages including lost business opportunities and attorney fees Therefore and

determined by the Circuit Court the allegations pled against State Auto in the Third-Party

Complaint regarding the breach of the duty of good faith and fair dealing were sufficiently pled as

a matter of law State Auto was unable to overcome the applicable 12(b)(6) standard and the

Motion to Dismiss was appropriately denied

11 CMD has properly pled claims for violations of the WV Unfair Trade Practices

Act

In the Third-Party Complaint CMD alleges that State Auto was subject to the laws of the

State of West Virginia pertaining to the appropriate and lawful conducting of the business of

insurance including but not limited to the statutory sections and their intended regulations known

as the West Virginia Unfair Trade Practices Act (UTPA) West Virginia Code sect33-11-1 et seq

Specifically CMD alleged that State Auto

7

a failed to act reasonably promptly with respect to the subject claim of CMD for

coverage in direct violation of West Virginia Code sect 33-11-4(9)(b)

b failed to attempt in good faith to effectuate a prompt fair and equitable settlement

ofeither the Plaintiffs claims or CMDs claims in direct violation of West Virginia

Code sect 33-11-4(9)(f)

c forced the Plaintiffs and now CMD to institute litigation in order to obtain the

coverage due CMD per the Insurance Policy thus constituting a direct violation of

West Virginia Code sect 33-11-4(9)(g)

App at 00018-00019

In addition the Comi also once again cited these allegations verbatim in its Order App

at 00003-00004 CMD has further alleged that the conduct of State Auto as described hereinabove

is part of a general business practice and constitutes unfair claims settlement practices under West

Virginia law and specifically under the provisions of West Virginia Code sect 33-11-4(9) Id eMD

has also clearly alleged that State Auto violations of the UTP A has caused it to suffer economic

damages including lost business opportunities and attorney fees Id Therefore the allegations

pled against State Auto in the Third-Party Complaint regarding violations of the West Virginia

Unfair Trade Practices Act are sufficiently pled as a matter of law State Auto was unable to

overcome the applicable 12(b)(6) standard and the Motion to Dismiss was appropriately denied

111 CMD has properly pled a claim for breach of contract

Lastly CMD properly pled a claim for breach of contract against State Auto CMD has

clearly alleged in the Third-Party Complaint that State Auto breached its contractual obligations

to satisfy all legitimate claims made against CMD which were covered under the Insurance Policy App

at 00019-00021 Specifically CMD has alleged that

a State Auto has breached its contractual obligations to satisfy the Plaintiffs claims

andor failing to effectuate the necessary repairs to the Evans Property in accord

with the Insurance Policy and by failing to effectuate the necessary repairs and

8

improvements to the Shah Propel1y in accord with the Insurance Policy among

other obligations

b State Auto failed to make available to CMD coverage under the Insurance Policy

c State Auto was in breach of contract with CMD in regards to the Insurance Policy

d As a result of the breach of contract by State Auto CMD suffered damages

including but not limited to insureds damages for net economic loss caused by

delay in settlement attorneys fees as well as general damages for annoyance and

inconvenience mental anguish emotional distress and damage to its reputation

Id

Judge Stucky also took notice of CMDs allegations of breach of contract and the same was

included in the Order App at 0005 Therefore the allegations pled against State Auto in the Thirdshy

Party Complaint regarding breach of contract are sufficiently pled as a matter of law State Auto

was unable to overcome the applicable 12(b)(6) standard and the Motion to Dismiss was properly

denied

Clearly the lower courts order is not clearly erroneous as a matter olaw Judge Stucky

clearly articulated the 12(b)(6) standard in the Order and viewed the Third-Party Complaint and

the facts in the light most favorable to CMD As such the Petitioners Writ should be denied

C CMD has properly asserted and is able to prove its claims for first-party bad faith

violations of the WV Unfair Trade Practices Act and breach of contract

As noted above State Autos Renewed Motion to Dismiss and the instant Petition

contain specific facts and evidence which are not included in the four-comers of the Third-Party

Complaint Despite the fact that such arguments are not appropriate for a Motion to Dismiss

Petitioner briefly responds to said arguments herein

i CMD as properly asserted and can prevail on its claim of Breach ofthe Duty ofGood Faith

and Fair Dealing

State Auto argues that CMDs allegations of first-party bad faith do not meet the criteria

ofeither ofthe two types of first-party bad faith claims recognized under West Virginia law This

9

is simply untrue State Auto relies heavily on a concurring opinion authored by Justice Davis in

State ex reI Brison v Kaufman 213 WVa 624 584 SE2d 480 490 (2003) State Autos reliance

is misplaced

In her concurring opinion Justice Davis cites to State ex ReI Allstate Ins v Gaughan 203

WVa 358 508 SE2d 7686 (1998) and elaborates on the different types of first party bad faith

actions However the concurring opinion which is not law but merely dicta does not change or

alter the Courts the Courts definition of first party bad faith The Court succinctly defined first

party bad faith in Gaughan as follows [fIor definitional purposes a first-party bad faith action

is one Yvherein the insured sues hisher own insurer for failing to use good faith in settling a claim

brought against the insured or a claim filed by the insured 203 WVa 358 at 369 (emphasis

added)

State Auto argues that since the underlying lawsuit filed by the Plaintiffs did not result in

an excess judgment there can be no bad faith claim However this is not the law in West Virginia

CMD has specifically alleged that State Auto committed bad faith in regard to State Autos acts

and omissions in failing to use good faith in handling and settling claims brought against CMD

State Auto also asserts that since the CGL policy does not cover first party losses that

CMD cannot assert a first-paliy bad faith claim To support its argument State Auto relies on the

fact that CMD conceded in the underlying Declaratory Judgment action that it was not making an

independent claim against State Auto for damage for repairs or alterations on the Shah or CMD

property However the fact that CMD is not asking for repairs to be made on the Shah or CMD

property does not acquit State Auto from duties owed to CMD to promptly and in good faith handle

claims against CMD under the policy The issue in this case is State Autos duty to act in good

faith and deal fairly with its insured CMD See eg Noland v Virginia Ins Reciprocal 224

WVa 372386686 SE2d 23 37 (2009) (The duty at issue in a badfaith breach of insurance

contract claim is the insurance companys duty to act in good faith and deal fairly with its

insured) (quoting Daugherty v Allstate Ins Co 55 P3d 224228 (ColoApp2002))

10

11 CMD is not a Third-Party Claimant in regards to its bad faith claim

State Auto also argues that CMD is a third-party claimant and is not entitled to bring a bad

faith cause of action Once again this argument is without merit West Virginia case law is very

clear that a first-party bad faith action is one wherein the insured sues hislher own insurer for

failing to use good faith in settling a claim filed by the insured Syl Pt 2 Loudin v National

Liability amp Fire Ins Co 228 WVa 34 716 SE2d 696 (2011) CMD clearly asserted viable

claims and fits the Courts definition ofa first-party

A third party claimant has no contract with the insurer has not paid any premiums has no

legal relationship to the insurer or special relationship of trust with the insurer and in short has

no basis upon which to expect or demand the benefit of the extra-contractual obligations imposed

on insurers with regard to their insureds In this case CMD has a valid policy in place with State

Auto CMD has paid all premiums due and complied with the terms and conditions of the

Insurance Policy Therefore CMD as the insured has the right to expect certain legal duties and

obligations from State Auto including the duty to act in good faith and deal fairly

As the Court explained in Loudin it would be fundamentally unfair to hold that when an

insured files an initial claim with its insurer it is not owed a duty of good faith and fair dealing in

resolving that claim as a first-party claimant Such an outcome essentially treats CMD as a nonshy

premium paying claimant seeking coverage under a third-partys policy when in fact CMD has

paid the premiums for the policy in question

West Virginia has long recognized the right of an insured first-party to bring a bad faith

cause of action against hislher insurer under the common law and the West Virginia Unfair Trade

Practices Act Syl pt 1 AIorton v Amos-Lee Secs Inc 195 WVa 691466 SE2d 542 (1995)

(There is a private cause of action for a violation of W Va Code 33-11-4(1)(a) (1985) of the

West Virginia Unfair Trade Practices Act) Hayseeds Inc v State Farm Fire amp Cas 177 WVa

323 352 SE2d 73 (1986) (holding that a common law duty of good faith and fair dealing nms

from insurer to its insured)

11

As discussed above CMDs allegations against State Auto relate to State Autos duty to

act in good faith and deal fairly on claims made by and on behalf ofCMD and the Plaintiffs CMD

has specifically alleged that State Auto has among other things delayed in investigating and

taking action on claims made by and on behalf ofCMD and the Plaintiffs and delayed in handling

facilitating and approving repair andor relocation of the sanitary sewer line As a result of these

delays CMD has suffered damages

State Auto fails to realize that CMD is not attempting to collect the costs to repair the sewer

line from the Charleston Sanitary Board or the Plaintiffs property Instead as a direct result of

State Autos delays CMD has also suffered its Olln damages CMD is entitled to the protections

afforded to a first-party insured As the West Virginia Supreme Court of Appeals has stated [a]

policyholder buys an insurance contract for peace of mind and security not financial gain and

certainly not to be embroiled in litigation The goal is for all policyholders to get the benefit of

their contractual bargain Miller v Fluharty 201 WVa 685 694 500 SE2d 310 319 (1997)

(footnote omitted)

Furthermore State Autos contention that CMD lacks standing is without merit In West

Virginia standing is defined as a partys right to make a legal claim or seek judicial enforcement

ofa duty or right Findley v State Farm Mut Auto Insu Co 576 SE2d 807 821 (WVa 2002)

CMD is claiming its own rights against State Auto for common law bad faith violation of the West

Virginia Unfair Trade Practices Act and breach ofcontract CMD as the insured has been harmed

by State Autos conduct CMD is not merely acting as an agent for the Plaintiff Evans As noted

above CMD itselfhas suffered damages and is entitled to bring its own claims against State Auto

111 CMDs claims are not barred by the Statute of Limitations

State Auto argues that the statute of limitations bars CMDs claims for common law bad

faith and violations of the West Virginia Unfair Trade Practices Act The third-party claims are

not barred because State Autos bad faith breach and improper handling of the claims were

continuing at the time the Third-Party Complaint was filed

12

Similar to the previously filed Motion to Dismiss State Auto relies on Noland which

recognizes that ajirst-party badfaith claim that is based upon an insurers refusal to defend and

is brought as a common law bad faith claim the statute of limitations begins to run on the

claim when the insured knows or reasonably should have known that the insurer refused to defend

him or her in an action However CMD is claiming that State Auto improperly and continually

through the filing of the Third-Party Complaint acted and continued to act in bad faith in handling

claims both against and now by its own insured

At the time of the filing of the Third-Party Complaint it had been over two and a half (2

Va) years since CMD first notified State Auto about the alleged damage that occurred to Plaintiffs

property CMD alleged that as of the filing of the Third-party complaint State Auto still had not

taken appropriate action to handle the claim Where a tort involves a continuing or repeated injury

the cause of action accrues at and the statute of limitations begins to run from the date of the last

injury or when the tortious overt acts or omissions cease Graham v Beverage 211 WVa 466

566 SE2d 603 (2002) CMD alleged and the lower Court found that CMD had properly asserted

its claim to defeat the statute of limitations argument At best for the Petitioner questions of

material fact exist in this matter which requires the jury to decide when the elements of the claim

were known and on what date the statute of limitations could reasonably begin to commence

Thus CMDs claim could not have been dismissed as a matter oflaw and the lower court did not

err in refusing to grant the Renewed Motion to Dismiss

IV CMD properly asserted and can prove its breach of contract claim against State Auto

Lastly State Auto argues that CMD cannot assert a breach of contract claim against State

Auto However the Third-Party Complaint clearly alleges that State Auto breached its contract

with CMD by failing to satisfy all legitimate claims against CMD which were covered under the

Insurance Policy CMD is clearly contractually entitled to rely upon State Autos obligation to

properly handle and settle all legitimate claims under the policy CMD also clearly asserted that

State Auto failed to do so and has therefore breached the Insurance Policy CMDs Third-Party

13

Complaint properly pled its breach of contract claim and therefore its claims were not dismissed

by the lower court

Moreover insurance policies are contracts and the legal obligations owed to and the duties

of the parties to an insurance policy are a contract law issue A basic tenet of contract law is that

the parties approach the contracting process act with good faith and the intent to deal fairly There

is an implied covenant ofgood faith and fair dealing in every contract whereby neither party shall

do anything which will have the effect of destroying or injuring the right of the other party to

receive the fruits of the contract 17A AmJur2d Contracts sect 370 CMD was owed a duty ofgood

faith and fair dealing by State Auto to pay their legitimate claims arising from the Insurance Policy

CMD has asserted that State Auto disregarded the duties it owed to CMD Therefore State Autos

Renewed Motion to Dismiss was appropriately denied by the lower court as it would unjustly

deny CMD of its rightful recourse under the law

VI CONCLUSION

Respondent CMD Plus Inc respectfully requests that Petitioners Petition for Writ of

Prohibition be denied Petitioner has failed to show entitlement to the extraordinary relief

requested and the lower court was correct in denying the Renewed Motion to Dismiss

Respectfully Submitted

c~~ Cries JOhnsto~(Wv Bar 5082) David A Dobson (WV Bar 12092) JOHNSTONE amp GABHART LLP Post Office Box 3 13 Charleston WV 25321 P 304-343-7100 F 304-343-7107 E sjohnstonewvlawnet

ddobsonwvlawnet

14

IN THE SUPREME COURT OF APPEALS OF WEST VIRGINIA

DOCKET NO 13-0931


(Civil Action No 11-C-606)


Petitioner

v Docket No 15-1178


Respondents

CERTIFICATE OF SERVICE

The undersigned counsel of record for Respondent CMD Plus Inc does hereby certify

this 29th day of December 2015 that a true copy of the foregoing RESPONSE IN

OPPOSITION TO PETITION FOR WRIT OF PROIDBITION was served upon all counsel

of record by depositing same to them in the US Mail postage prepaid sealed in an envelope and

addressed as follows

Trevor K Taylor Esq Taylor Law Office

34 Commerce Drive Suite 201 Morgantown WV 26501 n

- A Charles Johnstone I V Bar 5082) David A Dobson (WV Bar 12092) JOHNSTONE amp GABHART LLP Post Office Box 313 Charleston WV 25321 Tel 304-343-71 00 Fax 304-343-7104

TABLE OF CONTENTS

RESPONSE TO THE QUESTION PRESENTED 1

STATEMENT OF CASE 1

SUMMARY OF THE ARGUMENT 2

STATEMENT REGARDING ORAL ARGUMENT AND DECISION 3

ARGUMENT 3

A Petitioner has not met its burden for issuance of a Writ of Prohibition 3

B The Renewed Motion to Dismiss was appropriately denied by the lower court 5

1 CMD has properly pled a claim for common law bad faith 6

11 CMD has properly pled a claim for violations of the WV Unfair Trade Practices Act 7

111 CMD has properly pled a claim for breach of contract 8

C CMD has properly asserted and is able prove its claims for first-party bad faith violations of the WV Unfair Trade Practices Act and breach of contract 9

1 CMD has properly asserted and can prevail on its claim of Breach of the Duty of Good Faith and Fair Dealing 9

11 CMD is not a Third-Party Claimant in regards to its bad faith claim 11

iii CMDs claims are not barred by the Statute of Limitations 12

IV CMD properly asserted and can prove its breach of contract claim against State Auto 13

CONCLUSION 14


Cases

























11



Rules


Statutes



Other Authorities



III







discretion











































2









memorandum decision

V ARGUMENT


















3









460 SE2d 53 (1995)



















4




























5
























6






Property and


sanitary sewer line

Id













Act






7





Code sect 33-11-4(9)(f)




App at 00018-00019


















8


other obligations







Id





denied











and Fair Dealing



9



is misplaced








added)
















10



























11














(footnote omitted)













12



























13


by the lower court











VI CONCLUSION






ddobsonwvlawnet

14


DOCKET NO 13-0931




Petitioner

v Docket No 15-1178


Respondents











Cases

























11



Rules


Statutes



Other Authorities



III







discretion











































2









memorandum decision

V ARGUMENT


















3









460 SE2d 53 (1995)



















4




























5
























6






Property and


sanitary sewer line

Id













Act






7





Code sect 33-11-4(9)(f)




App at 00018-00019


















8


other obligations







Id





denied











and Fair Dealing



9



is misplaced








added)
















10



























11














(footnote omitted)













12



























13


by the lower court











VI CONCLUSION






ddobsonwvlawnet

14


DOCKET NO 13-0931




Petitioner

v Docket No 15-1178


Respondents












Rules


Statutes



Other Authorities



III







discretion











































2









memorandum decision

V ARGUMENT


















3









460 SE2d 53 (1995)



















4




























5
























6






Property and


sanitary sewer line

Id













Act






7





Code sect 33-11-4(9)(f)




App at 00018-00019


















8


other obligations







Id





denied











and Fair Dealing



9



is misplaced








added)
















10



























11














(footnote omitted)













12



























13


by the lower court











VI CONCLUSION






ddobsonwvlawnet

14


DOCKET NO 13-0931




Petitioner

v Docket No 15-1178


Respondents
















discretion











































2









memorandum decision

V ARGUMENT


















3









460 SE2d 53 (1995)



















4




























5
























6






Property and


sanitary sewer line

Id













Act






7





Code sect 33-11-4(9)(f)




App at 00018-00019


















8


other obligations







Id





denied











and Fair Dealing



9



is misplaced








added)
















10



























11














(footnote omitted)













12



























13


by the lower court











VI CONCLUSION






ddobsonwvlawnet

14


DOCKET NO 13-0931




Petitioner

v Docket No 15-1178


Respondents
































2









memorandum decision

V ARGUMENT


















3









460 SE2d 53 (1995)



















4




























5
























6






Property and


sanitary sewer line

Id













Act






7





Code sect 33-11-4(9)(f)




App at 00018-00019


















8


other obligations







Id





denied











and Fair Dealing



9



is misplaced








added)
















10



























11














(footnote omitted)













12



























13


by the lower court











VI CONCLUSION






ddobsonwvlawnet

14


DOCKET NO 13-0931




Petitioner

v Docket No 15-1178


Respondents


















memorandum decision

V ARGUMENT


















3









460 SE2d 53 (1995)



















4




























5
























6






Property and


sanitary sewer line

Id













Act






7





Code sect 33-11-4(9)(f)




App at 00018-00019


















8


other obligations







Id





denied











and Fair Dealing



9



is misplaced








added)
















10



























11














(footnote omitted)













12



























13


by the lower court











VI CONCLUSION






ddobsonwvlawnet

14


DOCKET NO 13-0931




Petitioner

v Docket No 15-1178


Respondents


















460 SE2d 53 (1995)



















4




























5
























6






Property and


sanitary sewer line

Id













Act






7





Code sect 33-11-4(9)(f)




App at 00018-00019


















8


other obligations







Id





denied











and Fair Dealing



9



is misplaced








added)
















10



























11














(footnote omitted)













12



























13


by the lower court











VI CONCLUSION






ddobsonwvlawnet

14


DOCKET NO 13-0931




Petitioner

v Docket No 15-1178


Respondents





































5
























6






Property and


sanitary sewer line

Id













Act






7





Code sect 33-11-4(9)(f)




App at 00018-00019


















8


other obligations







Id





denied











and Fair Dealing



9



is misplaced








added)
















10



























11














(footnote omitted)













12



























13


by the lower court











VI CONCLUSION






ddobsonwvlawnet

14


DOCKET NO 13-0931




Petitioner

v Docket No 15-1178


Respondents

































6






Property and


sanitary sewer line

Id













Act






7





Code sect 33-11-4(9)(f)




App at 00018-00019


















8


other obligations







Id





denied











and Fair Dealing



9



is misplaced








added)
















10



























11














(footnote omitted)













12



























13


by the lower court











VI CONCLUSION






ddobsonwvlawnet

14


DOCKET NO 13-0931




Petitioner

v Docket No 15-1178


Respondents















Property and


sanitary sewer line

Id













Act






7





Code sect 33-11-4(9)(f)




App at 00018-00019


















8


other obligations







Id





denied











and Fair Dealing



9



is misplaced








added)
















10



























11














(footnote omitted)













12



























13


by the lower court











VI CONCLUSION






ddobsonwvlawnet

14


DOCKET NO 13-0931




Petitioner

v Docket No 15-1178


Respondents














Code sect 33-11-4(9)(f)




App at 00018-00019


















8


other obligations







Id





denied











and Fair Dealing



9



is misplaced








added)
















10



























11














(footnote omitted)













12



























13


by the lower court











VI CONCLUSION






ddobsonwvlawnet

14


DOCKET NO 13-0931




Petitioner

v Docket No 15-1178


Respondents











other obligations







Id





denied











and Fair Dealing



9



is misplaced








added)
















10



























11














(footnote omitted)













12



























13


by the lower court











VI CONCLUSION






ddobsonwvlawnet

14


DOCKET NO 13-0931




Petitioner

v Docket No 15-1178


Respondents












is misplaced








added)
















10



























11














(footnote omitted)













12



























13


by the lower court











VI CONCLUSION






ddobsonwvlawnet

14


DOCKET NO 13-0931




Petitioner

v Docket No 15-1178


Respondents




































11














(footnote omitted)













12



























13


by the lower court











VI CONCLUSION






ddobsonwvlawnet

14


DOCKET NO 13-0931




Petitioner

v Docket No 15-1178


Respondents























(footnote omitted)













12



























13


by the lower court











VI CONCLUSION






ddobsonwvlawnet

14


DOCKET NO 13-0931




Petitioner

v Docket No 15-1178


Respondents




































13


by the lower court











VI CONCLUSION






ddobsonwvlawnet

14


DOCKET NO 13-0931




Petitioner

v Docket No 15-1178


Respondents











by the lower court











VI CONCLUSION






ddobsonwvlawnet

14


DOCKET NO 13-0931




Petitioner

v Docket No 15-1178


Respondents











DOCKET NO 13-0931




Petitioner

v Docket No 15-1178


Respondents










Documents

response, State ex rel. State Auto Property Ins. Co. v ...Docket No. 15-1178 THE HONORABLE JAMES C. STUCKY, Judge of the Circuit Court of Kanawha County, West Virginia and CMD PLUS,